Theories of Finance and their thought experiment. A. State what Homemade Financial Leverages? Design a thought...

 

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Theories of Finance and their thought experiment. A. State what Homemade Financial Leverages? Design a thought experiment to show how to adjust the exposure of financial leverage of stocks you hold. (5 points) B. State what Arbitrage is? Design a thought experiment to show how the arbitrage works. (5 points) C. What is the principle of No arbitrage? What its implications to classic theory of finance? (5 points) D. State the MM theory (Modigliani and Miller) Proposition one. To show the MM proposition I works through employing your knowledge of balance sheet with the pie models. Alternative, you may show the proposition through contracting a thought experiment by employing the idea of homemade leverage and no arbitrage principle. (10 points) Theories of Finance and their thought experiment. A. State what Homemade Financial Leverages? Design a thought experiment to show how to adjust the exposure of financial leverage of stocks you hold. (5 points) B. State what Arbitrage is? Design a thought experiment to show how the arbitrage works. (5 points) C. What is the principle of No arbitrage? What its implications to classic theory of finance? (5 points) D. State the MM theory (Modigliani and Miller) Proposition one. To show the MM proposition I works through employing your knowledge of balance sheet with the pie models. Alternative, you may show the proposition through contracting a thought experiment by employing the idea of homemade leverage and no arbitrage principle. (10 points)